Question

Alamar Petroleum Company offers its employees the option of contributing retirement funds up to 5% of their salaries, with the contribution being matched by Alamar. The company also pays 75% of medical and life insurance premiums. Deductions relating to these plans and other payroll information for the first biweekly payroll period of February are listed as follows: Wages and salaries Employee contribution to voluntary retirement plan Medical insurance premiums Life insurance premiums Federal income taxes to be withheld Local income taxes to be withheld Payroll taxes: Federal unemployment tax rate State unemployment tax rate (after SUTA deduction) Social Security tax rate Medicare tax rate $3,200,000 96,000 54,000 10,200 520,000 65,000 0.60% 5.40% 6.20% 1.45% Required: Prepare the appropriate journal entries to record salaries expense and payroll tax expense for the biweekly pay period. Assume that all employees' cumulative wages do not exceed the relevant wage bases for Social Security, FUTA or SUTA. Salaries are not yet paid. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list

Answer 1

1)
Event	General Journal	Debit	Credit
1	Salaries and Wages Expenses	$3,200,000
	Withholding Taxes Payable (Federal Income Taxes)		$520,000
	Withholding Taxes Payable (Local Income Taxes)		$65,000
	Social Security Taxes Payable ($3,200,000*6.20/100)		$198,400
	Medicare Taxes Payable ($3,200,000*1.45/100)		$46,400
	Medical Insurance Payable ($54,000*25/100)		$13,500
	Life Insurance Payable ($10,200*25/100)		$2,550
	Retirement Plan Payable		$96,000
	Salaries and Wages Payable ($3,200,000 - $520,000 - $65,000 - $198,400 - $46,400 - $13,500 - $2,550 - $96,000)		$2,258,150
	(To record salaries and wages expense)
2)
Event	General Journal	Debit	Credit
2	Payroll Taxes Payable ($198,400 + $46,400 + $19,200 + $172,800)	$436,800
	Social Security Taxes Payable ($3,200,000*6.20/100)		$198,400
	Medicare Taxes Payable ($3,200,000*1.45/100)		$46,400
	Withholding Taxes Payable (Federal Unemploment Taxes) ($3,200,000*0.60/100)		$19,200
	State Unemployment Taxes Payable ($3,200,000*5.40/100)		$172,800
	(To record the payroll tax expense)
3)
Event	General Journal	Debit	Credit
3	Salaries and Wages Expenses ($40,500 + $7,650 + $96,000)	$144,150
	Medical Insurance Payable ($54,000*75/100)		$40,500
	Life Insurance Payable ($10,200*75/100)		$7,650
	Retirement Plan Payable		$96,000
	(To record salaries and wage expense for fringe benefits)